Futures Away From Lows, Curve Steepens

The defensive price action surrounding the COVID situation in China allowed JGB futures to tick higher during the Tokyo morning, with the contract unwinding just over half of its overnight session lessons come the lunch bell, printing -5.

• Still, weakness in some of the core global FI markets on Friday has seemingly weighed on the wider JGB sphere, with the major benchmarks running little changed to 5bp cheaper as the curve bear steepens (10s are limited by the upper boundary of the BoJ’s permitted trading band).
• Local headline flow remains light.
• The latest round of BoJ Rinban operations generated the following offer/cover ratios:
• 1- to 3-Year: 2.26x (prev. 3.54x)
• 3- to 5-Year: 1.98x (prev. 1.62x).
• 5- to 10-Year: 2.35x (prev. 2.60x).
• 10- to 25-Year: 1.33x (prev. 3.04x).
• On the corporate issuance side, Berkshire Hathaway has mandated banks for a potential benchmark JPY bond offering, which may have added some weight to the longer end of the curve after the early catch up to Friday’s cheapening impetus in U.S. Tsys.